An employee resigns with effect from the end of the month. HR sends the leaving confirmation, forwards everything to payroll and notes: "14 days of remaining vacation, please pay out." What follows in many companies is a calculation based on gut feeling. Gross salary divided by 20, the result multiplied by 14, done. The problem: this formula is wrong, and it is the most common mistake in vacation payout in Germany.
In two decisions of 3 June 2025, the Federal Labour Court (Bundesarbeitsgericht, BAG) made clear that employers cannot fend off subsequent claims for vacation payout through termination agreements or court settlements if the calculation was wrong or the claim was wrongly excluded by contract. In every case, the employer bears the risk.
The mistake happens in day-to-day business
In practice, there are three recurring situations in which the vacation payout calculation goes wrong.
The first mistake is the wrong calculation period. Many HR teams use the current gross salary as the basis, although the law prescribes the average earnings of the last 13 weeks. Anyone who received commission, shift allowances or a pay rise in the last quarter risks being paid too little.
The second mistake concerns vacation balances. In companies without central absence management, vacation balances on the leaving date often do not match reality. Approved vacation that has not yet been deducted is missing, as are days from the current year that were rescheduled at short notice.
The third mistake is forgetting vacation from the previous year. Vacation days from the previous year that were lawfully carried over and could not be taken before leaving must also be paid out. If you overlook this item, you face the risk of back-payment claims going back up to three years.
Warning signs in everyday work: how to tell that your leaving process is error-prone
Many companies only realize in a dispute that their processes do not hold up. There are, however, clear warning signs in everyday work:
If you recognize at least two of these points, your leaving process cannot scale and is legally vulnerable.
What a wrong calculation really costs
An IT service provider with 40 employees has, on average, three to four people leaving the company each year. With an average salary of €4,500 gross and eight days of remaining vacation, the payout comes to around €1,660 gross per person.
A calculation that forgets just two days means a difference of over €400, which the employer must pay in a dispute, including default interest. If commission or allowances were ignored in a simplified calculation, the back payments quickly reach four figures. The limitation period is three years.
Vacation payout in Germany: what the law actually requires
Vacation payout (Urlaubsabgeltung) is not a voluntary benefit but a legal obligation. It is based on Section 7(4) of the Federal Leave Act (Bundesurlaubsgesetz, BUrlG): if vacation can no longer be granted in full or in part because the employment relationship ends, it must be compensated in money. The entitlement arises automatically when the employment relationship ends, regardless of whether the termination comes from the employer or the employee.
❗ Important in practice ❗
Vacation payout is not the same as a vacation bonus (Urlaubsgeld). A vacation bonus is a voluntary special payment; vacation payout is the legally enforceable compensation for vacation days not taken when the contract ends.
Calculating vacation payout on a salary: the 13-week formula
The basis for the calculation is set out in § 11 BUrlG. The decisive figure is the average earnings of the last 13 weeks before the end of the employment relationship. This gives the daily rate, which is multiplied by the number of open vacation days.
Formula for salaried employees with a five-day week:
Total gross earnings of the last 3 months / 65 working days = daily rate
Daily rate × number of remaining vacation days = vacation payout entitlement (gross)
The calculation includes base salary, allowances for night work, assignments abroad or hazardous work, and commission related to work performance. It does not include overtime paid separately or annual bonuses paid as a lump sum for the whole year or for a district.
Sample calculation: A full-time employee with an annual entitlement of 28 vacation days leaves on 31 March. By then, she is entitled to 7 remaining vacation days that she can no longer take. Her gross salaries for the last three months were €3,400, €3,750 and €3,600. Daily rate: 10,750 / 65 = €165.38. Payout entitlement: 165.38 × 7 = €1,157.66 gross.
Calculating vacation payout for hourly pay
For employees paid by the hour, the more direct route via daily earnings is usually simpler:
Daily earnings = hourly wage × weekly working hours / working days per week
Payout entitlement = daily earnings × remaining vacation days
If the hourly wage increased permanently during the calculation period, the higher rate must be applied to the entire period. This applies regardless of exactly when the increase took effect.
The 2025 BAG ruling and what employers need to know now
On 3 June 2025, the Federal Labour Court significantly limited employers' room for manoeuvre in two decisions.
First: clauses in termination agreements or court settlements that declare vacation entitlements as "granted in kind" across the board are invalid if the vacation was not actually taken (ref. 9 AZR 104/24). Employers who believe such wording protects them against later vacation payout claims have been on legally uncertain ground since this ruling.
Second: for employees on long-term sick leave who received no pay in the last 13 weeks, the reference period must not lead to a reduced payout amount. The minimum basis is the minimum wage at the time of leaving (ref. 9 AZR 137/24). You can find more on special cases involving sick employees in our article on vacation entitlement during illness.
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Handling vacation payout correctly: what a robust process looks like
Between the legal requirement and a working day-to-day routine, it is not the formula that decides but the process. A clean process ensures that all data is complete and available at the right time.
Step 1: establish the vacation balance bindingly
Define a fixed point in offboarding at which the vacation balance is finally established. Organizationally, this step belongs before the handover to payroll.
- HR takes the vacation balance directly from the leading system
- all approved and still open vacation requests are taken into account
- short-term changes are synchronized before completion
- managers confirm the balance once, not in an email loop
The goal is a binding data point that is not adjusted afterwards.
Step 2: record the full entitlement
In the second step, the entire entitlement is calculated. This is where most mistakes happen in practice.
- the pro-rata vacation entitlement for the current year is calculated
- vacation carried over from the previous year is checked
- documented notification duties are taken into account
- approved days not taken are added
It is important that this step is based on documented data, not on assumptions.
Step 3: determine the pay basis without media breaks
The daily rate must not be calculated from figures gathered together manually.
- the last 13 weeks are evaluated by the system
- all relevant pay components are taken into account automatically
- commission and allowances are allocated correctly
- irrelevant components such as overtime are excluded
This step determines the level of risk. Every manual correction increases the probability of errors.
The target process in everyday work
In practice, it quickly becomes clear whether a process is sustainable. A working process reduces coordination and prevents rework.
A typical process looks like this:
- The resignation is entered in the system
- The vacation balance is calculated automatically for the cut-off date
- HR checks and confirms the balance once
- Pay data for the last 13 weeks is provided automatically
- The payout amount is calculated and passed on to payroll
In this process, there are no follow-up questions between HR, managers and payroll. Everyone involved works with the same data.
Typical scenarios in IT and consulting companies
Scenario 1: IT service provider, 50 employees
A project lead resigns after nine years with effect from 30 June. He has not yet taken any vacation in the current year, and he had three remaining days from the previous year that he could not take because of project completions. There is no documented notice from the employer about the impending lapse, so the remaining days did not lapse on 31 March. Vacation entitlement for the current year: 30 / 12 × 6 = 15 days. Plus 3 remaining days from the previous year. A total of 18 days must be paid out.
If, without documented notices, you now argue that the previous year's vacation lapsed on 31 March, you are in a legally vulnerable position. In such cases, the employer bears the burden of proving that it fulfilled its duty to notify in the previous year in good time and verifiably. If this documentation is missing, the entitlement to payout remains, even if the internal vacation records suggest otherwise.
Scenario 2: consultancy with variable pay components
A senior consultant with a fixed salary of €5,000 and monthly commission of €800 to €1,200 leaves in October. Her commission for the last three months was €900, €1,100 and €800. Total gross earnings for the last 13 weeks: 5,000 + 900 + 5,000 + 1,100 + 5,000 + 800 = €17,800. Daily rate: 17,800 / 65 = €273.85. With 10 open vacation days, the payout entitlement is €2,738.50 gross.
If you forget the commission, you arrive at a daily rate of €230.77 and pay around €431 too little, which can be claimed in court for three years.
Scenario 3: agency with a part-time employee
A graphic designer works three days a week and leaves the company. Her pro-rata vacation entitlement for part-time work is calculated based on the actual number of working days: 20 days full-time equivalent / 5 × 3 = 12 days annual entitlement. The common mistake: using hours instead of working days as the basis for the vacation entitlement. In 2025, the Federal Labour Court confirmed once again that working days are decisive for the calculation, not hours worked.
Why manual calculation reliably fails
In theory, all steps can be mapped correctly in a spreadsheet. In practice, this fails because of the availability and quality of the data.
For a correct calculation, three data sources must be available in sync:
- absence data for the vacation balance
- pay data for the 13-week period
- documentation of carry-overs and notification duties
In many companies, this data sits in different systems or with different people. Reconciliation takes place under time pressure and inevitably leads to mistakes.
The problem is not the calculation itself, but getting to the right data.
Systematic payout without coordination effort
As soon as data from several sources has to be brought together, the risk of errors increases.
An integrated solution such as ZEP addresses exactly this point:
- vacation balances are always up to date and traceable
- approved absences are taken into account automatically
- booked hours and overtime for the relevant period are available directly
- everyone involved works on a shared data foundation
For the leaving process, this means in concrete terms:
The vacation balance is already available on the leaving date. HR does not have to collect data. Payroll receives all relevant information without follow-up questions. Managers are not drawn into coordination.
ZEP combines working time tracking, absence management and the payroll accounting export in one system. This eliminates manual reconciliation between several data sources.
What previously required up to 90 minutes of coordination per case is reduced to a clearly defined process with just a few steps.
Conclusion: secure your leaving process now
The legal requirements for vacation payout in Germany are clear. Mistakes arise in everyday work through unclear responsibilities, scattered data and manual coordination.
Three concrete measures help stabilize your process immediately:
- Define a fixed point in time for determining the vacation balance
- Make sure all relevant data comes from one source
- Avoid manual calculation steps in the leaving process
If these three points are not met, mistakes occur structurally and repeat with every departure.
A well-designed process not only reduces risks but also saves time and coordination with every departure. This is exactly where it is decided whether vacation payout remains a recurring problem or becomes a standardized process.
FAQs
How do I calculate vacation payout on a salary in Germany?
Vacation payout is based on a daily rate calculated from the average gross salary of the last 13 weeks before the contract ends. To get it, add up the gross earnings of the last three months including allowances and divide the result by 65 working days for a five-day week. The daily rate is then multiplied by the number of open vacation days. What counts is not the current monthly salary but the average, including all regular pay components.
Which formula applies to vacation payout?
The statutory formula is: total gross earnings of the last 13 weeks divided by the actual number of working days in this period gives the daily rate. This is multiplied by the number of vacation days to be paid out. For a five-day week, the divisor is 65 working days. The legal basis is § 11 of the Federal Leave Act (Bundesurlaubsgesetz, BUrlG). Overtime pay is not included, but allowances such as night or foreign assignment supplements are.
How do I calculate vacation payout for hourly pay?
For hourly pay, the direct route via daily earnings is recommended: hourly wage multiplied by weekly working hours, divided by the number of working days per week. If the hourly wage increased permanently during the calculation period, the higher rate must be applied to the entire period. The result is multiplied by the open vacation days. For regular allowances or shift bonuses, check whether they need to be included in the calculation period.
When does the employer have to pay out vacation?
Under German law, the obligation to pay out vacation arises automatically when the employment relationship ends, if remaining vacation days are still open and have not lapsed on the leaving date. This applies to ordinary and extraordinary termination, termination agreements and the expiry of fixed-term contracts. Garden leave during the notice period only counts as granting vacation if it is expressly and irrevocably linked to offsetting open vacation days. The payout is due with the final payroll.
How many vacation days have to be paid out on termination?
All vacation days that are still open and have not lapsed on the leaving date must be paid out. This includes the pro-rata annual vacation for the current calendar year and remaining vacation legitimately carried over from the previous year. The pro-rata annual entitlement is the annual vacation divided by twelve, multiplied by the months of employment completed up to the leaving date. Vacation that was already granted and taken before the termination does not, of course, have to be paid out.
What applies to vacation payout after long-term illness?
On 3 June 2025, the Federal Labour Court (BAG) made clear that reductions in earnings due to absences through no fault of the employee, in particular illness or full reduction in earning capacity, must not reduce the vacation payout entitlement. If the employee received no pay in the last 13 weeks, the reference period moves further into the past. The minimum basis is the statutory minimum wage applicable at the time of leaving. Employers who simply calculate with zero for long-term sick employees or treat the claim as settled in a settlement agreement risk claims for back payment.
